National Audit Office Auditor General Keynote: A review and recommendations - Part 5

Closing the fraud gap

In this final post on the key topics outlined in the last National Audit Office Keynote, we will talk about our views on how organisations can reduce fraud and error by looking to adopt new technologies in an Agile way. 

Notably, HMRC have been government leaders in some of the steps they’ve taken to tackle fraud and error, adopting emerging payments technology, such as Confirmation of Payee and Open Banking. It has also been working with the FinTech market to explore ways of bringing revenue in faster while also reducing fraud, for example VAT Split Payments.

But there is clearly still a long road ahead for closing the fraud gap. We believe technology plays a key role, and the approach should be the same as with any other technological issue:

1. Start small and work incrementally, with an agile mindset.

2. Re-use existing technology.

3. Use pre-commercial procurement approaches to work with the market to develop solutions where none currently exist.

Start small and work incrementally, with an agile mindset

Agile approaches to procurement and technological change can be a game changer. Starting small, iterating, and then applying the changes more broadly piece by piece means you can react to issues quickly, without compromising the whole system. For example, HMRC’s use of Open Banking was introduced to the Self Assessment process first, before being rolled out to other taxes.

Whilst HMRC have been the leaders in adoption of new financial technology, not all departments have followed suit. Regardless of the reason, adopting the incremental agile approach will help the public sector to implement these new technologies to help tackle fraud, error and debt whilst minimising risk to existing services.

Re-use existing technology

Since HMRC’s adoption of financial technologies, CCS have launched an agreement which allows the public sector to procure:

• digital payment services – allowing users to make or receive payments digitally, without the need for bank cards

• account information services – supplying account information, with users’ consent, as part of processes such as fraud identification, income verification and identity confirmation

• confirmation of payee services – providing checking services on names or accounts to verify individuals and/or organisations

It is now clear that financial technology services are set to become a commonly purchased service within the public sector. To truly capitalise on this, public sector organisations should look to both their peers and private sector examples, such as banks, to re-use solutions where possible, minimising costs whilst maximising the benefits.

Use pre-commercial procurement approaches to work with the market to develop solutions where none exist

Whilst re-using existing technologies can reduce costs to organisations and help realise benefits faster, it is not always possible. When no existing solutions exist in the market, organisations should consider using a pre-commercial procurement (PCP) approach to develop a solution with the support of the market. 

The European Commission defines PCP as “an approach to public procurement of research and development services [...]. It is an important tool to stimulate innovation as it enables the public sector to steer development of new solutions directly towards its needs.”. 

PCP can be the vehicle for developing a new solution to tackling fraud and error, without creating a monopoly. For example, HMRC has launched a proof-of-concept project to collect Value Added Tax at the point of transaction. By being open and transparent through publications of Prior Information Notices, engaging with all market actors, HMRC are approaching the problem from a design perspective. 

This approach can and should be adopted by other public sector organisations; from experience, market players are only too happy to contribute to such projects when engaged in the right way.